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Bull of the Day: Constellation Brands (STZ)

Constellation Brands, Inc. (STZ - Free Report) continues to cash in on strong demand for beer and spirits. This Zacks Rank #1 (Strong Buy) just posted record fiscal 2017 results and expects another record year in fiscal 2018.

Constellation Brands makes beer, wine and spirits at 40 facilities in the US, Mexico, New Zealand, Italy and Canada. It's the third largest beer company in the United States representing the big brands of Corona, Modelo Especial, Modelo Negra, Pacifico and Ballast Point, a craft brew that has won numerous awards.

It also sells well known wine brands including Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Franciscan Estate, Ruffino and The Prisoner.

In premium spirits, it sells SVEDKA Vodka, Casa Noble Tequila and High West Whiskey.

It has over 100 brands in its portfolio and operates out of New York.

Another Beat in the Fourth Quarter

On Apr 6, Constellation Brands reported its fiscal fourth quarter 2017 and full year 2017 results. It beat the Zacks Consensus Estimate by 11 cents, reporting $1.48 versus the consensus of $1.37.

Constellation has a great track record of beating, having missed just 2 times in the last 5 years.

Net sales rose 5% in the fourth quarter with organic net sales growth on a constant currency basis of 7%. Beer sales rose 11% with a 10% increase in organic net sales primarily due to volume growth and favorable pricing.

For the quarter, the company generated consolidated net sales growth of five percent. This reflects organic net sales growth on a constant currency basis of seven percent.

Net sales for beer increased 11 percent. This was due to a 10 percent increase in organic net sales driven primarily by volume growth and favorable pricing.

Wine and spirits were flat. The company also divested of its Canadian wine business in the quarter.

The beer business really drove sales for the full year. Net sales were up 17% with a 13% increase in organic net sales.

"Our beer business continues to be a powerhouse for growth. We exceeded our profit and margin goals for the year," said Rob Sands, CEO.

"These excellent results were driven by solid performance for every brand in our portfolio, which resulted in Constellation being the #1 growth contributor to the U.S. beer industry for the year."

"In addition, our portfolio posted industry-leading depletion growth in the 9 to 10 percent range for the first calendar quarter of 2017 after a challenging December for the U.S. beer industry," he said.

Guides Higher Than Consensus for Fiscal 2018

Not only was 2017 a record year for earnings, the company is equally as bullish about fiscal 2018.

Once again, the driver is expected to be the beer business. Constellation gave a forecast of net beer sales up between 9% and 11%.

It guided earnings in the range of $7.70 to $8.00, which is up more than 10% over last year's $6.76.

This was well above analyst guidance. They rushed out to update their estimates, with 4 estimate rising in the last week.

The Zacks Consensus has jumped to the high end of the range, to $7.99 from $7.57, since the report. This is earnings growth of 18%.

Shares At New Highs

The blockbuster earnings report soothed many frayed nerves. Shares jumped to new 2-year highs on the news.

Constellation trades with a forward P/E of 21.9. It's not cheap but you're paying for the growth story.

Investors will also get a small dividend for their troubles, currently yielding 0.9%.

For investors looking for a strong consumer brand play, and who want to make a big beer bet, then Constellation Brands is a stock to keep on your short list.

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